The foreign currency exchange (Forex) market is one of the largest financial networks in the world. Traders may participate in Forex much like they participate in the stock market or other financial markets. To trade Forex, you must open a Forex account with an established Forex broker. If you believe that you can accurately predict how currency exchange rates will change over time, trading Forex can be an effective way to profit from your insights.
Forex Market
The Forex market is a vast electronic network of individual traders and large institutions that together create an environment where nearly anyone can speculate on the valuation of major world currencies. The amount of trading capital that passes through the international Forex market each day is more than 10 times the total capital of all the daily stock market transactions in the world. A Forex account is a small part of this huge financial system that allows you to potentially profit from your predictions of future exchange rates between any two currencies.
Trading Platforms
Most Forex brokers provide their own proprietary trading software that interfaces with their brokerage system. These programs allow you to trade Forex directly from your PC in real time as prices fluctuate. Because of the fast-paced nature of the Forex market, your comfort level with the software associated with your Forex account is important. Different brokers may provide considerably different features in the form of screen layouts and the manner in which you place Forex orders.
Demo Accounts
Because individual Forex trading strategies vary, as do traders' desired software features, most Forex brokers provide free demo accounts to prospective clients. These temporary accounts provide full access to the software from a virtual trading account that is funded with fake capital. You can benefit not just from trying out the broker's software components, but also from practicing your Forex trading skills without the risks of using real money. This is an effective way of opening a Forex account. If you are satisfied with the platform, you can easily convert it into a real account by completing the broker's application.
Leverage
Most Forex accounts provide extraordinary leverage so you can profit considerably from small investments in currency exchange rates. Leverage is the ability to control large assets with little actual cash. A typical Forex account can provide anywhere from 20 to 100 times the buying power of the cash it contains. Thus for only $1,000 you could buy up to $100,000 worth of currency. If the exchange rate moves only a little, this magnifies into considerable profit or loss due to the leverage. This is a significant component of Forex accounts, and introduces considerable risk into Forex trading.
Open 24 Hours
Unlike the stock market, which is open during business hours, the Forex market never closes. This is an attractive aspect to using a Forex account. You can trade in the evenings or overnight while you continue to work other jobs during the day. For novice traders who want to learn how to actively trade, this is a good introduction into the financial markets.
Source - eHow
